MYSORE: Narayana Hrudayalaya, a pioneer in low-cost cardiac care, is building a chain of hospitals that will carry out heart surgeries at the cheapest rates in the world, buttressing India's reputation as the Mecca for frugal innovation.

A series of design and operational advancements, ranging from construction techniques to post-operative care, will mean that an open heart surgery can be performed for as low as Rs 65,000, or about one-fourth the cost in a corporate hospital.

The Bangalore-based healthcare provider aims to reach 100 towns with a population of 500,000 to one million in the next seven years. The first multi-specialty hospital at Mysore - in which the government of Karnataka has a 26% stake - will start operations this week.

Over the years, India has proven its expertise in creating world-class products and services at low cost, gaining from economies of scale. Tata Motors' small car Nano, the Aravind Eye Care System, Jaipur Foot prosthetic as well as Narayana Hrudayalaya hospital in Bangalore have been hailed as examples of frugal innovation.

The 200-bed, 1.5-lakh-square-foot Narayana Hrudayalaya hospital, set up with an investment of about Rs 45 crore - 80% cheaper than similar multi-specialty facilities - is built on a nine-acre plot. To begin with, the hospital, which has nine operation theatres, will have 23 doctors and about 40 nurses. "Charity is not sustainable, there has to be a business model," said Devi Prasad Shetty, cardiac surgeon and founder of Narayana Hrudayalaya. "Innovations have to be affordable; a magic pill will not do."

Right from design and construction, Narayana Hrudayalaya has sought new ways to cut costs. It has kept the design compact, reduced empty spaces and used prefabricated structures. Also, instead of marbles and expensive furniture, the hospital has used simple tiles and low-cost seating, reducing the cost per bed to Rs 12-18 lakh, compared with Rs 60-80 lakh at other corporate hospitals.

"This is the lowest that is humanly possible; we have cut every bit of flab in the system," said Viren Prasad Shetty, 28, senior vice-president for strategy and planning at Narayana Hrudayalaya Hospitals.

He is the son of Devi Shetty and an alumnus of Stanford Graduate School of Business.

The high cost of infrastructure is a major limiting factor for healthcare providers. To bring down costs, Narayana Hrudayalaya is running the Mysore facility like a startup. "We have a concept of producing a profit-and-loss account daily," said Viren Shetty. "Every system is a creature of desperation and we feel this model is one of them. In India, we have been for long time selling family jewellery and land to pay for healthcare."

Though 2.5 million heart surgeries are required in India every year, only 90,000 are performed. The country needs 3 million additional beds to serve the current needs of the population. Narayana Hrudayalaya aims to add 30,000 beds in small-to-medium towns in the next five years.

The cost of an open heart surgery at the Mysore facility, which is expected to also treat patients from north Kerala and parts of Tamil Nadu, will be 20% cheaper than the main Narayana Hrudayalaya hospital in Bangalore.

Ashwin Naik, co-founder and CEO of Vaatsalya Hospitals, a chain of affordable healthcare facilities in semi-urban and rural areas, said there is a big gap in quality healthcare in India. "As government hospitals are not funded enough, this is throwing up opportunities for entrepreneurs."

"Aravind Eye Care System and Narayana Hrudayalaya have a history of pioneering low-cost approaches," he said, observing that he expects Narayana Hrudayalaya to be successful with this model as well. "An affordable healthcare model is sustainable because it offers volumes," said Dr Shetty.

Larsen & Toubro, India's biggest engineering company that built the Mysore hospital, was initially sceptical about undertaking the project under such a tight budget. "At first they said, it is not possible," said Viren Shetty, who expects the hospital to treat around 210,000 outpatients and perform 3,750 surgeries in the first year for revenues of Rs 18 crore. "We will break even in eight months."

Narayana Hrudayalaya also reduced capital expenditure by buying low-cost medical equipment from small Indian firms and having a pay-per-use model for the more expensive ones. Also, the electricity bill is expected to be much lower due to the absence of elevators and air-conditioning as well as better use of natural light. "Back at the main hospital, we get Rs 1 crore as electricity bill," said Shetty.

The hospital will also outsource some activities requiring special skill-sets like tele-radiology to its main hospital to ensure optimal utilisation of specialists. Similarly, activities such as claims processing, discharge summary preparation would also be outsourced to the larger Narayana Hrudayalaya facilities.

After Mysore, Narayana Hrudayalaya will open a similar hospital in Bhubaneshwar, Orissa. "Once we are successful, this model can be easily replicated across varied geographies," said Viren Shetty.